Why Thalassa Holdings Limited shares are up 15% today

Updated: 
Oil rig

Shares in Thalassa Holdings(LSE: THAL) have jumped by around 15% in early deals this morning after the company issued somewhat of a cryptic press release. Specifically, the press release states, "the Board of Thalassa expects to announce shortly the revised trading outlook for the Company following review at a Board meeting today.

With Thalassa's shares heading higher, it looks as if the market is betting on the announcement of an improved trading outlook for the company when the board reports after its meeting today. This conclusion appears to be drawn from the fact that Thalassa also announced this morning that it has been awarded a contract from ConocoPhillips Skandinavia AS to acquire seismic data sets on the Eldfisk field in the North Sea during 2017. The shoot is estimated to last approximately two months and is expected to commence during the second quarter. 

The contract has been awarded to Thalassa's wholly owned subsidiary WGP Group Ltd, which is already on track to report a better than expected financial year. At the end of November management announced it was upgrading WGP's full-year 2016 sales forecast from $10.5m to $13.6m. 

Turbulent year

It has been a rocky year for Thalassa. The company, which provides services to the oil & gas industry, has been hit hard by the slump in oil & gas prices and drop in spending on offshore exploration activities. On revenues of $15.5m for 2014 and $18.9m for 2015, the company reported a net loss of $12.2m and $12.3m for each year respectively. Operating income came in at -$1.1m for 2014 and $1.4m for 2015.  

For the first half of 2016, the company reported revenues of $5.2m vs. $9.9m last year and gross profits of $2.9m vs. $4.2m last year. 

So, based on first half trading figures it looks as if 2016 is set to be another tough year for the group. City analysts expect the company to report a pre-tax profit of £0.4m this year falling to £0.24 for 2017. 

Activist activities 

As well as the tough trading environment, Thalassa has been entangled in a boardroom battle with The Local Shopping REIT this year. Thalassa acquired around a fifth of The Local Shopping REIT's shares back in September (at the same time the company also invested £400,000 in Papua Mining plc) and immediately started pushing for changes. 

At the beginning of November, Thalassa demanded The Local Shopping REIT hold a general meeting to remove from its board of directors Stephen East and Nicholas Vetch and to appoint to its board Duncan Soukup, Chairman of Thalassa, John Hutchinson and Toby Burgess. 

At the beginning of December, the Local Shopping REIT's shareholders voted against all proposals put forward by Thalassa. Now Mr. Soukup (who owns a majority shareholding in Thalassa) is engaged in a war of words with The Local Shopping REIT. 

Conclusion 

Thalassa's shares are rising today off the back of expectations that the company is about to upgrade its full-year earnings forecasts, but this bounce may be short lived if revenues continue to slide and management continues to attack other companies. 

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.